The current account deficit stood at $7.4 billion (4.4% of GDP) in 1HFY18; up by 59 percent year-on-year. The growing CAD is the biggest economic worry today that Pakistan faces. However, the deficit in December is slightly tamed to $1.13 billion versus $1.44 billion in November. The question is whether the decline in CAD in December is due to currency depreciation and other factors to promote exports and curtail imports.

Exports are up by 11 percent year-on-year in the half year at $11.8 billion. That is good news but there is no change in trend of exports in December, as the toll is down by 7 percent from November. Hence, the recent round of depreciation is yet to translate into exports gains.

Imports are growing at a higher pace at 19 percent to reach $26.1 billion in 1HFY18. However, in December, imports surprisingly declined by 6 percent or $248 million versus November.

This is a bit surprising seeing the oil prices on average were higher in December. There is a case of decline in imports across the board in December which is encouraging. Food imports are up by 11 percent in 1HFY18; but on monthly, basis it is down by 16 percent in December. The biggest decline is in transport sector, where the toll is up by 25 percent in the 1HFY18; but on monthly basis the imports fell by 20 percent.

Even in petroleum group, the toll is down on monthly basis despite higher oil prices. The imports are up by 27 percent in 1HFY18 while the number in December is down by 10 percent. The fact that RLNG imports are down to $46 million in December which is less than half of average monthly RLNG import of Jul-Nov is hard to digest. Since the RLNG consumption is increasing whilst the prices are up too; the decline in imports defies logic.

RLNG Imports averaged at $137 million per month during Mar17-Oct17 and it declined to $76 million in November and further down to $46 million in December. On the contrary, the RLNG imports are ought to increase in the last two months as the second RLNG terminal commissioned in November.

PSO imports 6 cargos every month with cumulative amount of 19.2 million MMBTU and with Brent at $64 per barrel in December and LNG price at 13.37 percent of Brent, the PSO RLNG import bill should be around $160 million. In addition, the second terminal imported 3 cargos in December which is another $80 million. Hence, in total the RLNG imports in December should have been north of $200 million versus $45 million mentioned in SBP’s data.

The PBS number, which depicts the exact import of RLNG, for Dec is yet to be released at the time of this writing; but in Nov, according to PBS, RLNG imports were at $166 million versus $76 million reported by SBP. Granted that the differential has been there and some numbers are reported with a lag, but the extent of differential is unfathomable. Had there been such a huge dip in LNG imports, it would have shown in power plants in trouble or industries crying for reduced supply. None of it happened. This is either a case of underreporting or some other arrangement. Whatever it is, sooner or later, the RLNG imports would explode.

What is the fun in deferring the numbers to future? BR Research’s hunch is since the government is going to international capital market for another $1.5-2 billion raise soon; this could be an attempt window dress. Now with the suspicion on the reporting of RLNG numbers, the improvement in imports has to be taken with a pinch of salt. And at least $200 million of imports are perhaps under reported in December.

Anyhow, taking the numbers on the surface, the CAD was $1.1 billion in Dec while the FDI was mere $200 million to cover it. However, the reserves were up by $1.45 billion in Dec, thanks to $2.5 billion raised from Euro Bond and Sukuk. Let’s have another round of bond issue in soon to not let the reserves fall too much too soon.